The NFP report last Friday beat expectations once again on the headline number raising the record streak to 14. The details of the report weren’t that great though. The unemployment rate jumped from 3.4% to 3.7%, which makes it the biggest M/M increase since the pandemic. The average workweek hours worked ticked lower (employers generally lower the hours before laying off people).
All in all, there was something for everyone there. The optimists saw a solid jobs growth and the higher unemployment rate and soft average hourly earnings as less labour market tightness that should reduce inflationary pressures. The lower average weekly hours worked may be seen as just a return to pre-pandemic trend.
The pessimists, on the other hand, focused more on the details rather than the headline number as generally it’s not the absolute number that matters but the trend.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, the S&P 500 made a new high following the NFP report beat and extended the overall rally to the 4298.50, a few ticks shy of the 4300 level. We can see that there’s a key swing level at the 4324.25 level and a clear break of that resistance would open the door for the 4600 level next. We should find strong sellers at that 4324.25 resistance if the price gets there. For the buyers there’s no good entry point at the moment. They should wait for the 4324.25 breakout or a pullback before considering new longs.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, there’s a good support zone at the 4240 level where we can find the previous higher low, the red 21 moving average and the 38.2% and 50% Fibonacci retracement levels. From a risk reward perspective, that support area would be a good spot where the buyers can lean on with a defined risk just below it. The sellers, on the other hand, are likely to pile in more aggressively in case the S&P 500 breaks below the upward trendline.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, the S&P 500 may even bounce on the red 21 moving average and continue higher if the bullish momentum from the last Friday’s rally remains strong. In that scenario though, we are likely to see a divergence and the selloff from the 4324.25 resistance should become even more likely.
The risk event to watch today is the US ISM Services PMI report.
- Given that the S&P Global Services PMI beat expectations the last month, we might expect a good reading for the ISM report. In case the data beats expectations and the prices paid sub-index comes out lower, the S&P 500 may rally on the soft landing expectations.
- Conversely, if the data misses expectations, we might see some weakness in the market, which may offer the above mentioned pullback or even a complete reversal.